SARS expects hundreds of millions in tobacco lockdown losses

tobacco leaves
The South African tobacco industry has warned that the current ban on the legitimate trade in tobacco products during the 21-day lockdown period will encourage illegal activity such as the illicit trade in tobacco products.
Photo: FW Archive

The government’s ban on the sale of legal tobacco products during the current national lockdown, which was put in place by Government as an urgent measure to slow down the spread of the coronavirus disease is South Africa, is likely to result in a dramatic spike in the illicit tobacco trade that reportedly already results in the South African fiscus losing over R8 billion a year in tax revenue.

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This was according to statements issued by the Fair-trade Independent Tobacco Association (FITA) and the South Africa Tobacco Transformation Alliance (SATTA).

The organisations appealed to government to urgently lift the ban on the sale of tobacco products implemented on the eve of the national lockdown.

Information on SATTA’s website stated that, before the lockdown, South Africa ranked among the world’s top five countries with the highest incidence of trade in illegal cigarettes. Almost 15 million illegal cigarettes are smoked in the country every day.

“The national lockdown shouldn’t be an experiment in getting smokers to quit. The current ban [on the legitimate trade in tobacco products] will encourage illegal activity, including fuelling illicit trade, and people may be tempted to break the regulations as the lockdown sets in. Decent citizens want to obey the lockdown, [but] that gets harder if they can visit stores [where they] are banned from buying goods they see on shelves every day,” said SATTA’s chairperson, Ntando Sibisi.

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In a 29 March open letter to the Minister of Trade, Industry and Competition, Ebrahim Patel, FITA’s chairperson, Sinenhlanhla Mnguni, said that while the organisation’s members respected government’s goal of limiting the spread of the coronavirus disease (COVID-19), banning the sale of tobacco products in authorised grocery outlets would not help.

“It has now been brought to [our] attention […] that the illicit trade in cigarettes and tobacco products has not abated and has, in actual fact, taken an upward trajectory. […] the regulations have led to the opportunistic criminals involved in the illicit trade taking advantage in order to supply a market, which can, at this stage, be described as desperate.”

He added that effects of this included consumers being tempted to bypass the lockdown’s movement controls to source illicit products that were now the only ones available; a loss of income for South Africa’s tobacco value chain and its over 11 000 jobs; and a loss of income for the country’s already struggling economy.

Mnguni urged Patel to authorise “at least the distribution and sale of cigarettes at retail stores, spaza shops and filling stations”.

South African Police Service spokesperson, Brigadier Vishnu Naidoo, told Farmer’s Weekly at the time of publication that tobacco products remained non-essential items during the national lockdown.

Naidoo referred Farmer’s Weekly to Patel’s spokesperson, Sidwell Medupe, for further information. Medupe had not replied to requests for comment at the time of publication.